STATE OF INDIANA. October 3, Board of Directors Fremont Housing Authority 3160 Spring Street Fremont, IN 46737

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1 STATE OF INDIANA AN EQUAL OPPORTUNITY EMPLOYER STATE BOARD OF ACCOUNTS 302 WEST WASHINGTON STREET ROOM E418 INDIANAPOLIS, INDIANA Telephone: (317) Fax: (317) Web Site: October 3, 2013 Board of Directors Fremont Housing Authority 3160 Spring Street Fremont, IN We have reviewed the audit report prepared by Pamela J. Simpson, Independent Public Accountant, for the period April 1, 2011 to March 31, In our opinion, the audit report was prepared in accordance with the guidelines established by the State Board of Accounts. Per the Independent Public Accountant's opinion, the financial statements included in the report present fairly the financial condition of the Fremont Housing Authority, as of March 31, 2012 and the results of its operations for the period then ended, on the basis of accounting described in the report. The Independent Public Accountant's report is filed with this letter in our office as a matter of public record. STATE BOARD OF ACCOUNTS

2 FREMONT HOUSING AUTHORITY REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA TWELVE MONTHS ENDED MARCH 31, 2012

3 FREMONT HOUSING AUTHORITY TABLE OF CONTENTS Auditor's Report Management s Discussion and Analysis FINANCIAL STATEMENTS Statement of Net Assets as of March 31, Statement of Revenue, Expenses and Changes in Net Assets - Proprietary Funds Twelve Months Ended March 31, Statement of Cash Flows - Twelve Months Ended March 31, Notes to Financial Statements SUPPLEMENTAL DATA Schedule of Expenditure of Federal Awards PHA s Statement and Certification of Actual Modernization Cost - Phase IN36P Phase IN36P Auditor s Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Status of Prior Audit Findings Schedule of Findings and Questioned Costs - Summary Current Findings, Recommendations and Replies Financial Data Schedule - REAC Electronic Submission

4 Independent Auditor s Report Board of Commissioners Fremont Housing Authority Fremont, Indiana I have audited the accompanying financial statements of the Fremont Housing Authority, as of and for the year ended March 31, 2012, as listed in the table of contents. These financial statements are the responsibility of the Fremont Housing Authority s management. My responsibility is to express opinions on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Fremont Housing Authority, as of March 31, 2012 and the respective changes in financial position and cash flows for the year end in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, I have also issued my report dated November 20, 2012 on my consideration of the Fremont Housing Authority s internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements with other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit. 920 West Pershing Road Decatur, Illinois Office: (217) Fax: (217) pjscpa31a@aol.com

5 Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 3 through 7 and be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I have applied certain limited procedures on the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial systems. I do not express an opinion or provide any assurance on the information because the limited procedure do not provide me with sufficient evidence to express an opinion or provide any assurance. My audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise Fremont Housing Authority s basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the Fremont Housing Authority. The accompanying financial data schedule and other additional statements and schedules listed as supplemental data in the table of contents has been subjected to the auditing procedures and certain other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. My audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Fremont Housing Authority s basic financial statements. The introductory and statistical sections are presented for the purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and accordingly, I do not express an opinion or provide any assurance on it. Decatur, Illinois November 20, 2012 Certified Public Accountant

6 FREMONT HOUSING AUTHORITY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, As management of the Fremont Housing Authority (the Authority), we offer readers of the Authority s financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended March 31, We encourage readers to consider the information presented in conjunction with the Housing Authority s financial statements. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Rejeania Frasier, Executive Director, Fremont Housing Authority, P. O. Box 189, Fremont, Indiana, (260) FINANCIAL HIGHLIGHTS The Authority s unrestricted cash balance at March 31, 2012 was $111,858, representing an increase of $9,861 from March 31, The total assets were $1,157,939 at the fiscal year ending March 31, 2012, a decrease of $39,816. The Authority had total revenues of $193,311, comprised of Department of Housing and Urban Development (HUD) operating subsidy of $46,826, Capital Grants of $41,610, tenant income of $104,118 and interest income of $757 for the year ended March 31, The Authority had General Fund Investments a total of $267,115 at the fiscal year ended March 31, 2012, an increase of $491. OVERVIEW OF THE FINANCIAL STATEMENTS The financial statements included in this annual report are those of a special-purpose government engaged in a business-type activity. The following statements are included: Statement of Net Assets reports the Authority s current financial resources (short term spendable resources) with capital assets and long-term debt obligations. Statement of Revenues, Expenses, and Changes in Fund Net Assets reports the Authority s operating and non-operating revenues, by major source along with operating and non-operating expenses and capital contributions. Statement of Cash Flows reports the Authority s cash flows from operating, investing, capital and non-capital activities. Future Events (New Business) There are no future events planned by the Authority during the fiscal year ending March 31, 2013 that will significantly affect the Authority s Net Assets either positively or negatively.

7 FREMONT HOUSING AUTHORITY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, CONDENSED COMPARATIVE FINANCIAL STATEMENTS Analysis of Entity Wide Net Assets Total Assets for FYE 2011 was $1,197,755 and at FYE 2012 the amount was $1,157,939. This represents a net decrease of $39,816. Cash increased by $9,861 or 10% due to basic operations. Other Current Assets increased by $704. Capital Assets decreased by $50,381. The change in Capital Assets will be presented in the section of this analysis entitled Analysis of Capital Assets. Current Liabilities decreased by $42. The table below illustrates our analysis: Net Change Percent Variances Cash 111, ,997 9,861 10% Other Current Assets 274, , % Capital Assets 771, ,074 (50,381) -6% Total Assets 1,157,939 1,197,755 (39,816) -3% Current Liabilities 20,200 20,242 (42) 0% Noncurrent Liabilities % Total Liabilities 20,200 20,242 (42) 0% Net Invested in Capital Assets 771, ,074 (50,381) -6% Unrestricted Net Assets 366, ,439 10,607 3% Total Net Assets 1,137,739 1,177,513 (39,774) -3%

8 FREMONT HOUSING AUTHORITY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, ANALYSIS OF ENTITY WIDE REVENUES The Authority administers the following programs and the revenues generated from these programs during Fiscal Year Ending 2012 were as follows: Program Revenues Generated Low Income Public Housing $144,701 Capital Fund Grant Program $45,610 Formula Capital Fund Stimulus Grant $3,000 Total revenues for Fiscal Year Ending March 31, 2011 were $267,487 as compared to the total revenues for Fiscal Year Ending March 31, 2012 of $193,311. Comparatively, FYE 2011 revenues were more than FYE 2012 revenues by $74,176 due to decreases in operating and capital grants Net Change Percent Variances Tenant Revenue 104,118 94,103 10,015 11% HUD Operating Grants 46,826 72,967 (26,141) -36% HUD Capital Grants 41,610 95,054 (53,444) -56% Investment Income (58) -7% Other Revenue 0 4,548 (4,548) -100% Total Revenue $193,311 $267,487 ($74,176) -28%

9 FREMONT HOUSING AUTHORITY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, ANALYSIS OF ENTITY WIDE EXPENDITURES Total Expenditures for Fiscal Year Ending March 31, 2011 were $230,672 as compared to $233,085 of total expenditures for Fiscal Year Ending March 31, Comparatively, Fiscal Year Ending 2012 expenditures were more than Fiscal Year Ending 2011 expenditures by $2,413. Changes by major expense category will be presented below. Administrative expenditures decreased only $815. Utilities increased by $2,236 due to normal increases in utility costs and fluctuations in usage. Maintenance expenditures decreased by $2,947 or 8%. This was due to decreases in materials needed and contracts costs. General Expenses had a slight decrease of $68. The table below illustrates our analysis: Net Change Percent Variances Administative 61,954 62,769 (815) -1% Tenant Services % Utilities 16,672 14,436 2,236 16% Maintenance Expense 36,456 39,403 (2,947) -8% General Expense 21,136 21,204 (68) 0% Depreciation Expense 95,917 91,910 4,007 4% Total Expenses $233,085 $230,672 $2,413 1%

10 FREMONT HOUSING AUTHORITY MANAGEMENT S DISCUSSION AND ANALYSIS MARCH 31, BUDGETARY ANALYSIS The Authority adopts a consolidated annual operating budget for all programs. The budget for Low Income Public housing is adopted on the basis of accounting prescribed by the Housing and Urban Development, which differs in some respects from generally accepted accounting principles. The Authority prepares a budget for each fiscal year of Capital Fund Grant Program that is approved. The Authority is permitted four years to expend these funds. Income is only recognized as funds are expended. For the purposes of this analysis, the amount budgeted is equal to the actual expense. ANALYSIS OF CAPITAL ASSET ACTIVITY Net Change Percent Variances Land 22,000 22, % Buildings 2,210,511 2,194,614 15,897 1% Furniture & Equipment-Dwellings 30,985 29,346 1,639 6% Furniture & Equipment-Admin 22,471 17,471 5,000 29% Leasehold improvements 66,417 43,417 23,000 53% Total Fixed Assets 2,352,384 2,306,848 45,536 2% Accumulated Depreciation -1,580,691-1,484,774 95,917 0% Net Fixed Assets 771, ,074 (50,381) -6% OUTSTANDING DEBT The Housing authority had no debt outstanding at the end of 2011 or 2012.

11 8 FREMONT HOUSING AUTHORITY STATEMENT OF NET ASSETS - PROPRIETARY FUNDS AS OF MARCH 31, 2012 ASSETS CURRENT ASSETS Cash $ 106,327 Security deposit cash 5,531 Accrued interest receivable 33 Investments 267,115 Deferred charges 7,240 Total Current Assets $ 386,246 CAPITAL ASSETS Land, buildings and equipment $ 2,352,384 Less: Accumulated depreciation -1,580,691 Net Capital Assets $ 771,693 Total Assets $ 1,157,939 LIABILITIES CURRENT LIABILITIES Accounts payable $ 7,418 Accrued liabilities 12,782 Total Current Liabilities $ 20,200 NET ASSETS Invested in capital assets $ 771,693 Unrestricted 366,046 Total Net Assets $ 1,137,739 The notes to financial statements are an integral part of this statement.

12 9 FREMONT HOUSING AUTHORITY STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS TWELVE MONTHS ENDED MARCH 31, 2012 Operating Income Tenant rental revenue $ 100,140 Tenant revenue - other 3,978 Total Rental Revenue $ 104,118 HUD grants - operating 46,826 Total Operating Income $ 150,944 Operating Expenses Administration $ 61,954 Tenant services 950 Utilities 16,672 Ordinary maintenance and operation 36,456 General expense 21,136 Depreciation 95,917 Total Operating Expenses $ 233,085 Net Operating Income (Loss) $ -82,141 Nonoperating Income (Expense) Interest income 757 Capital Contributions Capital fund grants 41,610 Total Nonoperating Income (Expense) $ 42,367 Changes in net assets $ -39,774 Net assets, beginning of year 1,177,513 Net assets, end of year $ 1,137,739 The notes to financial statements are an integral part of this statement.

13 10 FREMONT HOUSING AUTHORITY STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS TWELVE MONTHS ENDED MARCH 31, 2012 Operating Activities Operating grants $ 46,826 Tenant revenue 104,118 Payments to employees -56,662 Payments to suppliers and contractors -80,737 Net Cash Provided (Used) by Operating Activities $ 13,545 Investing Activities Investments (purchased) redeemed $ -491 Interest income 733 Net Cash Provided (Used) by Investing Activities $ 242 Capital and Related Financing Activities Capital fund grants $ 41,610 (Additions) deletions of fixed assets -45,536 Net Cash Provided (Used) by Capital and Related Financing Activities $ -3,926 Net Change in Cash $ 9,861 Cash Balance at March 31, ,997 Cash Balance at March 31, 2012 $ 111,858 The notes to financial statements are an integral part of this statement.

14 11 FREMONT HOUSING AUTHORITY STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS TWELVE MONTHS ENDED MARCH 31, 2012 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Net operating income (loss) $ -82,141 Adjustment to Reconcile Operating Income (Loss) to Net Cash Flows from Operating Activities: Depreciation 95,917 (Increase) decrease in deferred charges -189 Increase (decrease) in accounts payable -423 Increase (decrease) in accrued liabilities 381 Net Cash Provided (Used) by Operating Activities $ 13,545 The notes to financial statements are an integral part of this statement.

15 12 FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 Note 1 - Summary of Significant Accounting Policies (a) Organization and Reporting Entity - The Fremont Housing Authority was established by the City of Fremont pursuant to the laws of the State of Indiana, to transact business and to have powers as defined therein. The Housing Authority was established to provide low-rent housing for qualified individuals in accordance with the rules and regulations prescribed by the Department of Housing and Urban Development and other applicable Federal Agencies. Under the United States Housing Act of 1937, as amended, the U.S. Department of Housing and Urban Development (HUD) had direct responsibility for administering low-rent housing programs in the United States. Accordingly, HUD has entered into a contract with the Authority for the purpose of assisting in financing the acquisition, construction and leasing of housing units and to make annual contributions (subsidies) to the program for the purpose of maintaining its low-rent character. In evaluating the Authority as a reporting entity, management has addressed its relationship with the City of Fremont and concluded that the City does not maintain an oversight responsibility for the Authority's operations. An independent Board of Commissioners, appointed by the Mayor, is responsible for the activities of the Authority. The Authority recruits and employs its executive staff and has substantial legal authority to control its affairs without requiring approval of the City government. Debt incurred by the Authority is not an obligation of the City; the City does not review or approve the Authority's budget, is not entitled to any surplus funds generated by the Authority's operations and is not responsible for any deficits incurred by the Authority. The Authority is governed by a Board of Commissioners appointed by the office of the Mayor, and has governance responsibilities over all activities related to all housing activities within the City, The Board of Commissioners has decision making authority and the power to designate management. The members do not serve at the discretion of the Mayor, i.e. they can only be removed for cause. The Authority s Board elects its own chairperson. Consequently, in accordance with evaluating the criteria set forth in Section 2100 and 2600 of the Governmental Accounting Standards Board Codification, management has concluded that the Fremont Housing Authority is a separate reporting entity. All funds and programs of the Housing Authority are included in these statements. The Housing Authority has no component units. (b) Method of Accounting - Prior to April 1, 1999, the records of the Housing Authority were maintained on an accrual basis in accordance with the accounting procedures prescribed by the Department of Housing and Urban Development as outlined in the Low-Rent Housing, Accounting Handbook, HM These practices differ in some respects from generally accepted accounting principles. As of October 1, 1998, the Department of Housing and Urban Development mandated that all housing authorities prepare financial statements in conformity with generally accepted accounting principles (GAAP). The Housing Authority applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The funds apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict or contradict GASB pronouncements, in which case, GASB prevails.

16 13 FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (c) Financial Statement Presentation Although no formal policy has been adopted, the Authority distinguishes operating revenues and expenses from non-operating items when preparing financial statements. Operating revenues and expenses generally result from providing services in connection with the Authority s principal ongoing operations. Principal operating revenues are tenant rents and HUD grants. Operating expenses include administration, maintenance, insurance, depreciation, utilities and other general expenses. All revenues and expenses not meeting these definitions are reported as non-operating revenues and expenses. (d) Funds - Each of the programs of the Housing Authority are organized on a basis of fund accounting, using a separate set of self balancing accounts as prescribed by HUD. The programs of the Housing Authority are: * Low Rent Public Housing * Capital Fund Program * Formula Capital Fund Stimulus Grant These programs are all accounted for within the Proprietary (enterprise) fund as described below: Proprietary Fund Types: Proprietary funds use the economic resources measurement focus and utilize the accrual basis of accounting. All assets and liabilities associated with a proprietary fund s activities are included on the fund statement. Proprietary fund equity is segregated into Invested in Capital Assets Net of Related Debt, Restricted Net Assets and Unrestricted Net Assets. (e) Cash and Cash Equivalents - For purposes of the statement of cash flows, the Housing Authority considers all highly liquid investments to be cash equivalents. The term highly liquid refers to investments with a maturity of 1 month or less when purchased to be cash equivalents. This is the practice followed by the Housing Authority, although no formal policy has been adopted. (f) Accounts Receivable - The tenants accounts receivable discloses the gross amount due from the tenants at March 31, 2012, and does not take into consideration prepaid amounts. The Housing Authority provides for an allowance for doubtful accounts, based on the estimated collections of current accounts receivables. The Housing Authority periodically writes off uncollectible accounts receivable to the allowance account based on a review of the current status of existing receivables and the determination that the receivable will not be collected. (g) Investments - Investments are stated at cost which approximates market.

17 14 FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (h) Fixed Assets - For the purpose of determining, distinguishing and recording materials and non-expendable equipment and personal property purchased or acquired in connection with development, management, and maintenance of publish housing developments owned or operated, the Housing Authority follows the following capitalization policy: If the initial cost of a piece of equipment and/or other personal property is five hundred dollars ($500) or more and the anticipated life or useful life of said equipment or property is more than one (1) year, the same shall be capitalized and recorded as non-expendable equipment and charged as a capital expenditure. Land, buildings and equipment contains the following: 1) The total development construction costs incurred for each project at the end of the initial operating period, 2) nonexpendable equipment, and 3) property betterments and additions 4) land acquisitions. These are recorded at cost. Depreciation of property and equipment is provided using the straight line method for financial reporting purposes at rates based on the following estimates: Buildings 40 years Equipment 3-10 years (i) Net Assets - GASB Statement 34 requires the classification of net assets into three components as defined below: 1) Invested in capital assets, net of related debt - this component of net assets consists of capital assets, net of accumulated depreciation, costs to be recovered from future revenues and unamortized debt expense reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. 2) Restricted - this component of net assets consist of constraints placed on net assets use through external constraints imposed by creditors, contributors or laws and regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. 3) Unrestricted - this component of net assets consists of net assets that do not meet the definition of restricted or invested in capital assets, net of related debt.

18 15 FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) Note 1 - Summary of Significant Accounting Policies (j) Income Tax - The Authority, organized as a non-profit corporation subsidized by the Federal government, is exempt from Federal and State income taxes. (k) Annual Contributions/Subsidies and Other Grants Annual contributions and subsidies received from the Department of HUD are recorded as grant revenues. Other grants (such as CFP grants) are recognized when program expenditures are incurred. Such revenue is subject to review by the Department of Housing and Urban Development and may result in disallowance in subsequent periods. (l) The Housing Authority adopts a budget annually. The budget is approved by the Board of Commissions. Subsequent budget revisions must also be approved. (m)the preparation of financial statements in conformity with generally accepted accounting principles require the Housing Authority to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. (n) Leasing activities (as lessor) - the Authority is the lessor of dwelling units mainly to low income and/or elderly and disabled residents. The rents under the lease are determined generally by the resident s income as adjusted by eligible deductions regulated by HUD, although the resident may elect for a flat rent option. Leases may be cancelled by the lessee at any time. The Authority may cancel the lease only for cause. (o) Rental income is recognized as rents become due. (p) At any time during the year and at year end, there are construction projects in process. These projects include modernizing rental units. The projects are funded by HUD and funds are requested periodically as costs are incurred. Note 2 - Cash and Investments Statutes authorize the Housing Authority to invest in certificates of deposit, money market funds, United States government securities and repurchase agreements fully collateralized by United States government securities. All cash and investments are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or other equivalent insurance company of the depository financial institutions. The deposits exceeding the insured or registered limits are public funds covered by the State of Indiana Public Deposit Fund.

19 16 Note 2 - Cash and Investments (Continued) Custodial Credit Risk FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) a. Deposits - Custodial credit risk is the risk that in the event of a financial institution failure, the Authority s deposits may not be returned to or that the Authority will not be able to recover collateral securities in the possession of an outside party. b. Investments - Custodial credit risk is the risk that in the event of the failure of the depository, the Authority will not be able to recover the value of its investments or collateral securities that are in the possession of the outside party. Credit Risk Investments, Concentration of Credit Risk and Interest Rate Risks - Investments Credit Risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations. The Housing Authority has no investment policy that limits its investment choices other than the limitation of state law and/or the Department of Urban Development regulations. Concentrations of Credit Risk is the risk of loss attributed to the amount of the investment in a single issuer. The Authority does not have a formal investment policy covering the concentration of credit risk. Investment Rate Risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Housing Authority has no formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The cash deposits held at financial institutions can be categorized according to three levels of risk. These three levels of risk are as follows: Category 1 - Category 2 - Category 3 - Deposits which are insured or collateralized with securities held by the Housing Authority or by its agent in the Housing Authority s name. Deposits which are collateralized with securities held by the pledging financial institution s trust department or agent in the Housing Authority s name. Deposits which are not collateralized or insured. Based on the three levels of risk, all of the Housing Authority s funds are classified as Category 1. Program Book Balance Bank Balance Low Rent $ 111,858 $ 131,635

20 17 Note 2 - Cash and Investments (Continued) FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) Similar to cash deposits, investments held at financial institutions can be categorized according to three levels of risk. These three levels of risk are: Category 1 - Category 2 - Category 3 - Investments that are insured, registered or collateralized with securities held by the Housing Authority or by its agent in the Housing Authority s name. Investments which are uninsured and unregistered held by the counter-party s trust department or agent in the Housing Authority s name. Uninsured or unregistered investments held by the counter-party, its trust or its agent, but not in the Housing Authority s name. Based on the three levels of risk, all of the Housing Authority s investments are classified as Category 1. Program Book Balance Market Value Low Rent $ 267,115 $ 267,115 Note 3 - Compensated Absences Vacation leave with pay shall be earned by all regular full time employees at specified rates. Employees may accrue vacation leave up to twenty working days maximum. An employee who is permanently separated shall be paid in a lump sum for any accumulated vacation leave at his current rate of pay, except where his dismissal is due to malfeasance. Employees may be paid for leave taken because of illness. Sick leave may be accumulated at the rate of one day per month, with a maximum accumulation not to exceed 30 days. In no event shall an employee be paid for sick leave not taken. Note 4 - Defined Contribution Plan The PHA funds a SEP-IRA plan with Farm Bureau Insurance Company for the Executive Director. The contribution is approved annually. During the current year, the PHA made no contributions for FYE 2012, one contribution was provided for the part time employee of $563 or 10% of salary. Note 5 - Investments At March 31, 2012 investments consist of the following: Rate Cost Fair Value Certificates of deposit % $ 267,115 $ 267,115

21 18 Note 6 - Deferred Charges FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) This classification includes the following accounts: Prepaid insurance $ 7,240 Note 7 - Fixed Assets Balance as of March 31, 2012 $ 771,693 Balance as of March 31, ,074 Reconciliation Net Increase (Decrease) $ -50,381 Additions $ 45,536 Current year depreciation expense -95,917 * Net Increase (Decrease) $ -50,381 Analysis 04/01/2011 Additions/ Deletions/ 03/31/2012 Balance Transfers Transfers Balance Land $ 22,000 $ 0 $ 0 $ 22,000 Buildings 2,194,614 15, ,210,511 Equipment and furniture 46,817 6, ,456 Leasehold improvements 43,417 23, ,417 Total $ 2,306,848 $ 45,536 $ 0 $ 2,352,384 Accumulated depreciation -1,484,774-95,917 * 0-1,580,691 Net Assets $ 822,074 $ -50,381 $ 0 $ 771,693 *Current year depreciation expense recognized. Note 8 - Accounts Payable This classification includes the following accounts: Vendors and contractors $ 1,887 Tenants security deposits 5,531 Total $ 7,418

22 19 FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) Note 9 - Notes Payable On August 4, 1987, the U.S. Department of Housing and Urban Development (HUD) issued notice PIH to implement the provisions of the Housing and Community Development Reconciliation Amendments of 1985 (PL , enacted April 7, 1986). This notice states, in part, the following: Project debt to HUD (HUD-held notes) will be forgiven after a debt forgiveness amendment to the consolidated Annual Contributions Contract has been executed by HUD and the Public Housing Authority and after the Actual Development Cost Certificate has been included in an audit and approved. As a part of the HUD mandated GAAP conversion and the above referenced notice, all HUD-held notes were recorded as debt forgiveness during a prior fiscal year. Note 10 - Accrued Liabilities Accrued liabilities consists of the following: Accrued compensated absences $ 3,387 Accrued wages/payroll tax payable 1,048 Payment in lieu of taxes 8,347 Total $ 12,782 Note 11 - Contingencies Federal Grants In the normal course of operations, the Housing Authority receives grant funds from the Department of Housing and Urban Development. The programs are subject to audit by agents of HUD, the purpose of which is to ensure compliance with conditions precedent to the granting of funds. Any liability for reimbursement which may arise as a result of these audits is not believed to be material. Note 12 - Activities of the PHA The Housing Authority had 40 units in management at March 31, 2012.

23 20 Note 13 - Contracts/Commitments FREMONT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS TWELVE MONTHS ENDED MARCH 31, 2012 (CONTINUED) As of March 31, 2012, the Housing Authority had entered into the following pending construction projects in progress: Funds Approved Funds Expended To Date CFP $ 49,071 $ 0 CFP ,465 0 CFP ,550 0 CFP ,429 0 Note 14 - Risk Management Total $ 176,515 $ 0 The Housing Authority carries commercial insurance coverage to cover exposure and the risk of losses related to torts, thefts, damages, destruction of assets, errors and omissions, injuries, natural disasters and defalcation. For insured programs there has been no significant reduction in insurance coverage. Settled claims have not exceeded insurance coverage in the current or past three years. Note 15 - Economic Dependency The Housing Authority received a significant portion of its revenue (46%) from the United States Department of Housing and Urban Development. This funding is subject to federal government appropriations and potential funding reductions.

24 SUPPLEMENTAL DATA

25 22 FREMONT HOUSING AUTHORITY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE TWELVE MONTHS ENDED MARCH 31, 2012 Federal Receipts or CFDA Contract Grant Program Revenue Disbursements/ Federal Grantor/Program Number Number Period Amount Recognized Expenditures U.S. Department of HUD Direct Programs: FYE Public and Indian Housing a C /31/12 $ 39,826 $ 39,826 $ 39,826 Public Housing - FYE Capital Fund C /31/12 $ 222,125 $ 45,610 $ 45,610 Formula Capital Fund FYE Stimulus Grant C /31/12 $ 62,114 $ 3,000 $ 3,000 Total Housing Assistance $ 324,065 $ 88,436 $ 88,436

26 23 FREMONT HOUSING AUTHORITY PHA s STATEMENT AND CERTIFICATION OF ACTUAL MODERNIZATION COST PHASE IN36P The Actual Modernization Costs of Phase IN36P are as follows: Funds approved $ 48,154 Funds expended 48,154 Excess of Funds Approved $ 0 Funds advanced Grants $ 48,154 Funds expended 48,154 Excess of Funds Advanced $ 0 2. The distribution of costs by project, as shown on the final Statement of Modernization Cost, dated November 27, 2012, accompanying the Actual Modernization Cost Certificate submitted to HUD for approval, is in agreement with the PHA s records. 3. All modernization costs have been paid and all related liabilities have been discharged through payment.

27 24 FREMONT HOUSING AUTHORITY PHA s STATEMENT AND CERTIFICATION OF ACTUAL MODERNIZATION COST PHASE IN36P The Actual Modernization Costs of Phase IN36P are as follows: Funds approved $ 45,610 Funds expended 45,610 Excess of Funds Approved $ 0 Funds advanced Grants $ 45,610 Funds expended 45,610 Excess of Funds Advanced $ 0 2. The distribution of costs by project, as shown on the final Statement of Modernization Cost, dated November 27, 2012, accompanying the Actual Modernization Cost Certificate submitted to HUD for approval, is in agreement with the PHA s records. 3. All modernization costs have been paid and all related liabilities have been discharged through payment.

28 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Board of Commissioners Fremont Housing Authority Fremont, Indiana I have audited the financial statements of Fremont Housing Authority as of and for the year ended March 31, 2012, and have issued my report thereon dated November 20, I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing my audit, I considered Fremont Housing Authority s internal control over financial reporting as a basis for designing my auditing procedures for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Fremont Housing Authority s internal control over financial reporting. Accordingly, I do not express an opinion on the effectiveness of Fremont Housing Authority s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. My consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. I did not identify any deficiencies in internal control over financial reporting that I consider to be material weaknesses, as defined above. 920 West Pershing Road Decatur, Illinois Office: (217) Fax: (217) pjscpa31a@aol.com

29 Compliance and Other Matters As part of obtaining reasonable assurance about whether Fremont Housing Authority s financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of my audit, and accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. I noted certain matters that I reported to management of Fremont Housing Authority in a separate letter dated November 20, This report is intended solely for the information and use of management, Board of Commissioners, others within the entity, and Department of Housing and Urban Development and other Federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties. Decatur, Illinois November 20, 2012 Certified Public Accountant

30 27 FREMONT HOUSING AUTHORITY STATUS OF PRIOR AUDIT FINDINGS The prior audit report for the period ended March 31, 2011 contained no findings.

31 28 FREMONT HOUSING AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS - SUMMARY FOR THE TWELVE MONTHS ENDED MARCH 31, 2012 Section I - Summary of Auditor s Results Financial Statements Type of auditor s report: Unqualified * Material weakness(es) identified? yes X no * Significant deficiency (ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: * Material weakness(es) identified? yes X no * Significant deficiency (ies) identified? yes X none reported Type of auditor s report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133? yes X no Identification of major programs: CFDA Number(s) N/A Name of Federal Program or Cluster NONE Dollar threshold used to distinguish between type A and type B programs: $ 300,000 Auditee qualified as low-risk auditee? X yes no

32 29 FREMONT HOUSING AUTHORITY CURRENT FINDINGS AND RECOMMENDATIONS Section II - Financial Statement Audit Findings There were no financial statement audit findings discussed with Rejeania Frasier, Executive Director during the audit or at an exit conference held November 20, Section III - Federal Awards Audit Findings and Questioned Costs There were no federal awards audit findings or questioned costs discussed with Rejeania Frasier, Executive Director during the audit or at an exit conference held November 20, 2012.

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38 Board of Commissioners Fremont Housing Authority Fremont, Indiana In planning and performing my audit of the financial statements of Fremont Housing Authority as of and for the year ended March 31, 2012, in accordance with auditing standards generally accepted in the United States of America, I considered the Housing Authority s internal control over financial reporting (internal control) as a basis for designing my auditing procedures for the purpose of expressing my opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Fremont Housing Authority s internal control. Accordingly, I do not express an opinion on the effectiveness of Fremont Housing Authority s internal control. The administration of the Housing Authority is responsible for establishing and maintaining a system of internal accounting control. In fulfilling this responsibility, estimates and judgements by the administration are required to assess the expected benefits and related costs of control procedures. The objectives of a system are to provide reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use of disposition and that transactions are executed in accordance with authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any system of internal accounting control, errors or irregularities may nevertheless occur and not be detected. Also, projection of the system to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. My study and evaluation made for the limited purpose described in the first paragraph would not necessarily disclose all material weaknesses in the system. However, my study and evaluation disclosed certain conditions in the following areas of which you should be aware in order to improve operating efficiencies and strengthen internal controls: 1. The Housing Authority is reminded to file cost certificate for the Formula Capital Fund Stimulus Grant This communication is intended solely for the information and used of management, the Board of Commissioners, and others within the housing authority, and is not intended to be and should not be used by anyone other than these specified parties. Please feel free to contact me if you have any questions. Decatur, Illinois November 20, 2012 Certified Public Accountant 920 West Pershing Road Decatur, Illinois Office: (217) Fax: (217) pjscpa31a@aol.com